RBI hikes repo rates by 25 basis points

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Aug 02, 2018

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RBI hikes repo rates by 25 basis points

The Monetary Policy Committee, MPC, of the Reserve Bank of India today hiked repo rate by 25 basis points to 6.50 per cent in its third bi-monthly monetary policy review of 2018-19.

For the second consecutive time, the six-member MPC headed by RBI Governor Urjit Patel has hiked the key policy repo rate by 25 basis points. Repo rate is the rate at which the RBI lends money to commercial banks in the event of any shortfall of funds.

Reverse repo rate, the rate at which the Reserve Bank borrows money from commercial banks within the country, was adjusted to 6.25 per cent. Accordingly, the Marginal Standing Facility rate and the Bank Rate too stand adjusted at 6.75 per cent.

In the second bi-monthly monetary policy review announced in June, RBI had hiked the repo rate by 25 basis points to 6.25 per cent while maintaining a neutral stance. This time too, RBI has maintained neutral stance with an objective of achieving the medium-term target for headline inflation of 4 per cent while supporting growth.

The Reserve Bank today retained the GDP forecast for the current fiscal at 7.4 per cent on robust corporate earnings and buoyant rural demand, though it flagged global trade tensions for Indian exports.

It said, various indicators suggest that economic activity has continued to be strong. It noted that the progress of the monsoon so far and a sharper than the usual increase in MSPs of Kharif crops are expected to boost rural demand by raising farmers' income.

RBI has projected inflation to stay at 4.8 per cent in the second half of the current fiscal and is likely to touch 5 per cent in the first quarter of 2019-20.

The next meeting of the Monetary Policy Committee is scheduled to be held between 3rd and 5th October, 2018.

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